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- Luxury goods manufacturer Kate Spade has continued to post strong adjusted operating profit growth in FY2014, thanks to growing sales tallies for its Kate Spade unit.
- However, the company's financial performance appears to have missed the market's expectations, leading to a negative stock price return in 2014.
- With a forward P/E multiple of roughly 101, the company seems to have more downside risk than upside potential and investors should probably look elsewhere for gains in the sector.
- Kate Spade & Company (KATE) reported spectacular earnings on November 6th, 2014.
- We think the company can grow quite large based on commentary made by management.
- The company has a very strong execution record.
- Valuation is reasonable compared to peers.
Don't Be Left Holding The Bag: A Kate Spade, Michael Kors Pair Trade
- Women's fashion is a fickle business (this is a good thing for those that seek to understand the ebb and flow of art/style and more relevantly FOMO/envy culture).
- Last year, Coach traded at a >100% premium to Michael Kors -- since that time, KORS has usurped dominance in the eyes of the market.
- ... now trading at a remarkable >60% premium to Coach.
- I am now recommending a long Kate Spade -- short KORS pair trade until the market cap differential converges, at least from a 4:1 to 2:1 ratio.
- ... a 100% upside in KATE; 50% downside in KORS -- or until KORS buys KATE.
- The shares of Kate are down 16% over the last week, as it revised longer-term guidance downward.
- Value investors might be fooled into thinking this a great entry into a growth stock.
- The valuation is still very rich despite the pullback, and the North American market appears to be saturating.
Kate Spade Shares Routed After Earnings, Stock Still A Sell
- Kate Spade announced quarterly earnings yesterday.
- The Street was ecstatic over a 49% increase in revenue Y/Y and $10 million operating profit.
- However, after margin pressure from discounting to move excess inventory and keep up with competitors, the stock sold off by over 25%.
Kate Spade Is Synonymous With 'Cachet' And 'Consistent Operating Losses'
- Kate Spade announces quarterly earnings tomorrow.
- The brand's cache and upscale appeal have led to strong topline growth.
- However, its consistent operating losses are a cause for concern and do not warrant its enterprise value of 4x LTM revenue.
Fifth & Pacific Even More Expensive Following Asset Sales
Kate Spade Should Have A Higher Price To Sales Premium
Fifth & Pacific: Kate Spade Not Enough To Justify Valuation
Liz Claiborne: Shedding Brands, Gaining Growth Potential
Tue, Dec. 23, 2:59 PM
- The strong reads on consumer spending (ICSC, Redbook) bode well for Q4 earnings in the retail sector, note analysts.
- Electronics sellers (BBY, HGG) and the luxury sector (RL, TIF, COH, KORS, KATE, FOSL, VRA) are viewed as being in a good position to see a December boost.
- Companies which eased off on pulling a bulk of their sales forward with Black Friday/Cyber Monday deals are also seen as potential winners with sub-$2 gas resetting some holiday budgets.
- Though e-commerce is expected to dazzle again this holiday season. It's not all fun and games for analysts looking at margins. The extension by Amazon (AMZN -0.1%) of its free shipping offer could be a signal that inventory levels are higher than anticipated and that the growth-at-all-costs mentality at the company is as entrenched as ever, notes Nasdaq Advisory Services.
- The S&P Retail ETF (NYSEARCA:XRT) has doubled up the return of the S&P 500 over the last 3 months, 10.8% vs. 5.1%.
- Previously: Retail trends to watch: Athleisure, P-E buyouts, and new online channels (Dec. 20 2014)
- Related ETFs: XLP, XLY, VDC,VCR, RTH, RETL, FXG, PBJ, IYK, PEJ, FXD, IYC, FDIS, RHS, SCC, FSTA, UCC, PMR, PSL, UGE, RCD, PEZ, PSCC, PSCD, SZK
Thu, Dec. 18, 7:01 AM
- Apparel prices fell 1.1% in the U.S. during November, according to yesterday's CPI report.
- The drop followed a 0.2% slide in apparel prices for October.
- Retail analysts note that a higher mix of e-commerce sales and the lingering promotional haze threaten margin expansion in the sector, despite overall tighter inventory control.
- Apparel stocks: KATE, ANN, LULU, PVH, VNCE, CRI, UA, HBI, VFC, COLM, GIL, SQBG, JCP, KSS, DDS, M, JWN, RL, ARO, AEO, ANF, WTSL, TLYS, CACH, ZUMZ, PSUN, EXPR, BKE, KORS, UA, GIII, SQBG, HBI, SKX, FL, VRA, ICON, NKE, WWW, DECK, CROX, SHOO, BWS, PERY, DXLG, SHLD, BONT, GPS, GES, URBN.
Thu, Dec. 4, 10:31 AM
- Shares of Destination Maternity (DEST -7.8%) slide after the company misses earnings estimates.
- A frank assessment from the company on a misfire with its assortment to millennial-aged moms-to-be strikes a bit of a chord across the apparel and department store sector.
- Many of the earnings hits and misses this quarter have been tied to on-trend or off-trend assortments. A millennial group which is hard to nail down is becoming a bigger part of that puzzle.
- Apparel stocks: KATE, ANN, LULU, RL, PVH, VNCE, CRI, UA, HBI, VFC, COLM, KORS, GIL, SQBG, JCP, KSS, DDS, M, JWN, RL, ARO, AEO, ANF, WTSL, TLYS, CACH, ZUMZ, PSUN, EXPR, BKE, KORS, UA, GIII, SQBG, HBI, SKX, FL, VRA, ICON, NKE, WWW, DECK, CROX, SHOO, BWS, PERY, DXLG, SHLD, BONT, GPS, GES, URBN, TJX.
Mon, Dec. 1, 7:50 AM
- Comscore estimates e-commerce spending rose 32% on Thanksgiving Day to $1.01B and 26% on Black Friday to $1.51B.
- Most retail analysts are sticking with their forecast for 4.0%-4.5% growth for holiday sales this year, with early shopping and e-commerce making up for a dip in store traffic on Black Friday.
- Apparel sellers in particular came out with a stronger online push this year.
- Related stocks: OTCPK:AMZZ, EBAY, AEO, ANF, JCP, JNY, JWN, KSS, LB, M, URBN, PSUN, BKE, WTSL, GPS, FDX, UPS, DKS, BBY, LULU, KATE, VRA, SPLS.
Mon, Nov. 24, 11:15 AM
Wed, Nov. 12, 11:18 AM
- Macy's (NYSE:M) management was cautious on today's earnings call as the drop in Q4 and full-year EPS guidance was justified.
- A lull in sales after the Back-to-School season has bled into the early part of Q4.
- Omnichannel execution is better this year, says Macy's CFO Karen Hoguet. Capital spending on omnichannel could help the company's bottom line down the road.
- A major new private brand will be launched next year aimed at Latino customers.
- Kate Spade (NYSE:KATE) made an appearance during the earnings call. Hoguet says the Kate channel should be a driver for sales this holiday due its on-trend assortment.
- The impact from the West Coast ports labor turmoil appears to be limited with Macy's saying most deliveries are on target with their anticipated delivery dates.
- Earnings call webcast
Thu, Nov. 6, 1:55 PM
- Kate Spade (KATE +19.1%) soars after the company showed brisk sales growth and a wider gross margin rate in Q3 to defy the mall retailer funk this season.
- Operating income came in at $3.5547M vs. a loss of $1.329M a year ago.
- A decidedly on-trend assortment of handbags and accessories appears to have helped Kate Spade take market share from Coach, and perhaps slow down the Michael Kors juggernaut.
Thu, Nov. 6, 1:27 PM
- Apparel seller Ann issued a warning today on the impact of labor uncertainty at West Coast ports as part of its Q4 guidance.
- The retailer expects $8M in extra air freight costs due to product shipment delays.
- There's also been some reports of delays at ports in the Seattle and Tacoma area which account for 16% of container cargo traffic on the West Coast.
- Analysts fret that more companies will resort to air freight to ensure stores are stocked in front of the Black Friday rush.
- Apparel and footwear stocks: SKX, FL, VRA, ICON, NKE, WWW, DECK, CROX, SHOO, BWS, KATE, ANN, PERY, LULU, RL, PVH, VNCE, CRI, UA, HBI, VFC, COLM, KORS, GIL, SQBG, JCP, KSS, DDS, M, JWN, RL.
Thu, Nov. 6, 12:47 PM
Thu, Nov. 6, 9:14 AM
- Gainers: PLNR +74%. PESI +24%. SWIR +20%. MEET +13%. RVLT +11%. COT +11%. DATA +11%. ACAS +10%. NDLS +9%. KATE +8%. KATE +8%. WFM +9%. HZNP +6%. CECO +6%. DRYS +5%. TRUE +5%.
- Losers: AEZS -51%. SZYM -47%. SNMX -26%. GNW -24%. WWWW -22%. CSOD -19%. PHMD -17%. GERN -14%. MCP -12%. GNRC -11%. WAC -9%. QCOM -7%. Z -7%. PBR -5%.
Thu, Nov. 6, 7:55 AM
- Kate Spade (NYSE:KATE) reports comparable direct-to-consumer sales rose 15.2% in Q3.
- The company's rapid expansion drove sales higher. Retail space square footage in North America was up 47% from a year ago.
- Segment revenue growth: Kate Spade North America +11.0% to $192.9M, Kate Spade International -2.6% to $50.9M, Adelington Design Group +15.5% to $6.63M.
- Gross profit rate +140 bps to 62.8%
- SG&A expenses +32.3% to $154M.
- KATE +7.6% premarket
Thu, Nov. 6, 7:25 AM
Wed, Nov. 5, 5:30 PM
- AAON, AAP, AAWW, AEE, AES, AINV, AKRX, AMCX, AMRC, AMSC, AOL, APA, AZN, BBG, BCE, BCRX, BDBD, BKCC, BR, CDW, CECE, CECO, CNK, CNQ, COTY, CPN, CRZO, CVC, CYNI, DNOW, DTV, ERJ, FSYS, FUN, FUR, GEO, GLP, GNRC, GOLD, HAIN, HII, HNR, HSC, HSIC, HSP, HZNP, IT, KATE, KERX, KLIC, LIN, LMIA, LPI, MITL, MPEL, MWIV, NAVB, NRF, NTWK, NXTM, ONE, OWW, PBH, PDCE, PERI, PHMD, PKD, PMC, PNK, POZN, PRFT, PRGO, PRIM, PTCT, RDNT, RGEN, SATS, SCMP, SFUN, SFY, SGM, SLH, SNI, SNMX, SRPT, TAP, TCPC, TDC, TEDU, THS, TK, TNDM, TPH, TU, VC, VIVO, WAC, WD, WEN, WIN, ZEUS
Wed, Sep. 24, 8:13 AM
- Retail sales could increase by 4.5% to $986B this holiday season on an improved macroeconomic backdrop, forecasts Deloitte Touche.
- The mark would easily top last year's 2.8% rise.
- Online sales are tipped to rise by 14%.
- Promotional activity across broad retail has been dialed back a touch during the back-to-school season, but is still a risk to margins heading into the crucial shopping period.
- What to watch: This holiday season could be an operational pressure cooker for UPS (NYSE:UPS) and FedEx (NYSE:FDX) with demand expected to be high.
- Related stocks: AAP, AEO, ANF, BBBY, BBY, BJ, CHS, COH, COST, DG, FDO, FL, GPS, JCP, JNY, JWN, KSS, LB, LULU, M, NDN, PIR, RL, TGT, TIF, TJX, UA, URBN, VFC, WMT, ZLC, PERY, SQBG, VNCE, KORS, GIII, KATE, GIL, VRA, ICON, PSMT, AMZN.
- Related ETFs: XLY, XRT, VCR, RTH, RETL, IYK, FXD, FDIS, PMR, UGE, RCD, SZK
Thu, Aug. 14, 3:38 PM
- Tiger Global Management was active in buying and exiting positions in consumers stocks over the last quarter, according to th hedge fund's most recent filing.
- New positions: Netflix (NASDAQ:NFLX), Vera Bradley (OTC:VERA), Coca-Cola (NYSE:KO).
- Increased: 21st Century Fox (NASDAQ:FOXA) to 19.26M shares; Restoration Hardware (NYSE:RH) to 3.193M shares.
- Maintained: Burger King (NYSE:BKW) at 7.2M shares, MasterCard (NYSE:MC) at 3.44M shares, Dollar General (NYSE:DG) at 7.893M shares.
- Exits: SodaStream (NASDAQ:SODA), Kate Spade (NYSE:KATE), Carter (NYSE:CRI).
- SEC Form 13F
Wed, Aug. 13, 7:27 AM
- Piper Jaffray cuts estimates on Guess (NYSE:GES) after seeing Kate Spade (NYSE:KATE) throw a scare into the sector during its earnings call by signaling it might push its EBITDA margin goal out a year.
- Wedbush Securities analyst Corrina Freedman thinks the 25.4% drop in Kate Spade yesterday was overdone. The investment firm is a buyer at current levels.
- Piper lowers its outlook on profit margins for Guess and drops it price target to $29.
KATE vs. ETF Alternatives
Kate Spade & Co, formerly Fifth & Pacific Companies, Inc., designs and markets accessories and apparel under three global, multichannel lifestyle brands: kate spade new york, Kate Spade Saturday and Jack Spade.
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